ASX closes lower as investors weigh potential rate cuts and fresh tariff uncertainty

Welcome to your five-minute trading recap of the day.

The numbers

The S&P/ASX 200 closed lower on Monday, down 13.7 points, or 0.2 per cent, to 8589.30 after finishing last week at a record high. The minor fall comes as a potential Reserve Bank rate cut and fresh US tariff uncertainty weighs on investors. Five of the ASX’s 11 sectors finished higher and five closed lower, with industrials flat.

The Aussie dollar had fallen sharply, trading at a 12-day low of US65.13¢ from US65.72¢ at close of business on Friday.

The lifters

Origin Energy jumped 6.8 per cent as UK company Octopus Energy – owned 23 per cent by Origin – considers a $20.7 billion stake sale of its technology business.

It powered a strong-performing utilities sector, up 3.5 per cent, with Meridian Energy and APA Group advancing 2.2 per cent and 0.4 per cent, respectively.

The healthcare sector was up 0.9 per cent, led by biotech giant CSL, up 2.2 per cent, and Pro Medicus, up 0.7 per cent.

Origin Energy jumped during today’s trading. Credit: Chris Hopkins

The strong performance of Santos, Yancoal and Ampol, which rose 0.4 per cent, 0.7 per cent and 0.8 per cent, respectively, was outweighed by Woodside’s 0.8 per cent dip. That comes as the cartel of energy exporting countries announced it would accelerate oil production, which led to the price of the commodity slipping 1 per cent.

The laggards

The materials sector sagged 0.9 per cent as the miners weighed on the market. Iron ore giants BHP and Rio Tinto fell 0.3 per cent and 0.2 per cent, respectively, countered slightly by Fotescue’s 0.1 per cent gain.

Dragging the sector further was Northern Star resources, which shed 8.7 per cent after it announced “strong” quarterly sales of 444,000 ounces of gold, within its revised production guidance. Some investors are cashing in on the high price of gold, which has benefited from traders seeking haven assets as result of uncertainty since the re-election of US President Donald Trump.

South32’s Cerro Matoso mine in Colombia’s northern province of Cordoba.Credit: AFR

South32 closed 0.6 per cent after early gains. The metals company announced the sale of a nickel mine in Colombia in a move that chief executive Graham Kerr said would “further streamline our portfolio towards higher margin businesses in minerals and metals critical to the world’s energy transition”.

The financials sector closed down 0.2 per cent, with ANZ (down 0.6 per cent) and Westpac (down 0.4 per cent) leading the big four banks in small losses, in another suspected round of profit-taking.

The lowdown

The “relatively quiet” trading day was explained by investor concern about the outcome of Trump’s tariff negotiations, said senior investment adviser at Shaw and Partners Craig Sidney.

“We’re also just off all-time highs, so it’s probably a little bit of profit-taking and just concern about those tariffs,” he said.

Overseas, US sharemarket futures had fallen after Trump confirmed that America’s tariffs won’t come into effect until August 1 rather than this week, potentially dragging out the drama even further.

The White House said it was sending letters detailing “take it or leave it” tariff rates to a dozen countries – it wasn’t clear which.

“Tariffs go into effect August 1. But the president is setting the rates, and the deals, right now,” Commerce Secretary Howard Lutnick said as the president nodded in approval.

Markets had previously been operating under the assumption that the tariffs would go into effect on Wednesday, with the expiration of 90-day pause the Trump administration announced on April 9.

Investors are also waiting for the results of the Reserve Bank of Australia’s monetary policy board meeting on interest rates, with a cut of 25 basis points widely expected on Tuesday and already priced into the market.

“If that’s confirmed, that should be a positive move for the market,” Sidney said.

“[At the] end of financial year a lot of fund managers are probably still doing reports and what have you, and then we’re coming to reporting season. Hence the lack of volume.”

Westpac chief economist Luci Ellis said a cut was no “shoo-in”, but the board would have no clear rationale to hold until August as even a hotter-than-expected June inflation outcome would be unlikely to change the equation.

“A decision to cut in July is one of timing and tactics, not whether to cut at all,” the former Reserve Bank economist said. “If the question is now or in five weeks’ time, the juice is not worth the squeeze. Just get on with it.”

Economists are much less unified in their expectations for an August cut.

The markets have priced in a better-than-even chance the board will go back-to-back-to-back, but Ellis doesn’t expect the next cut after July to come until November.

ANZ, NAB and CBA believe the central bank will cut again in August, as does AMP chief economist Shane Oliver, who expects governor Michele Bullock to fuel market hopes with more dovish commentary after the meeting.

US President Donald Trump has softened his approach on tariffs.Credit: Bloomberg

Meanwhile on Wall Street, the S&P 500’s record rally has brought it within striking distance of a sell signal, Bank of America’s Michael Hartnett said.

US stocks have soared back to all-time highs on signs that the US economy is staying resilient as US Trump softens his approach on tariffs. That has ignited speculative fever in the market, with technology heavyweights back in vogue and the buzz around artificial intelligence returning.

Hartnett recommended investors start offloading shares once the benchmark rises above 6300 points – just 0.3 per cent above its Thursday close. He also reiterated that bubble risks were rising into the northern summer, with the House passing a $US3.4 trillion ($5.2 trillion) fiscal package that cuts taxes.

“Overbought markets can stay overbought, as greed is harder to conquer than fear,” Hartnett wrote in a note.

Data showed US jobs growth exceeded expectations in June for a fourth straight month and the unemployment rate fell. Traders scrapped wagers on an interest rate cut from the Federal Reserve this month.

“This report takes a July rate cut firmly off the table – the Fed simply won’t move in the face of this kind of strength,” said Patrick Armstrong, chief investment officer at Plurimi Wealth. “However, a September cut remains likely as the overall trend still points to gradual labour market softening.”

With Bloomberg, Reuters

The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.